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September 17, 2013

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Plan for aviation hubs stirs criticisms

More than 50 cities in China have answered the government’s call for cleaner economic growth with plans for aviation hubs, airports clustered with industrial zones. The problem is that they may not all be needed.

The cities hope the projects will attract investment in areas like logistics, high-technology and finance — the sort of businesses China is encouraging to move the economy away from the smoke-stack industry that has driven rapid growth for years.

But critics argue the projects will exacerbate a problem China is trying to stamp out — debt-fueled construction that local authorities have used for years to boost their local economies.

After years of massive investment, China is trying to turn the economy more toward consumption-led growth, worried that continued rapid investment in factories and infrastructure will be redundant as growth slows.

Such “plans often start high key, but end poorly,” said government researcher Wang Jun, who visited an airport project last month.

“It is not necessarily a good thing for the whole nation, as so much investment will often lead to overcapacity and increase local government debts,” said Wang, who works at the China Center for International Economic Exchanges, a government think tank.

“There are already signs of redundant investment, as some regions in China have too many airports, which are not in full operation.”

Developing an aviation hub is more than simply building an airport, said Wang Xiaohua, a senior consultant specializing in the aviation industry at Kent Ridge Consulting in Fujian Province.

It first of all requires minimum annual passenger flows of 10 million and cargo volume of 200,000 tons, she said. Only Beijing, Shanghai, Guangzhou, Chengdu, Shenzhen and Kunming met that criteria at the end of 2012.

“It’s hot. Many cities are crazy about the idea,” said Wang, who has advised cities in the Inner Mongolia Autonomous Region and Yunnan Province on aviation-hub projects.

To be sure, China will need more airports as the economy grows. China has 19 airports per million square kilometers compared with 57 in the United States.

But profits are elusive. Of China’s 183 airports, 143 are loss making, data from the Civil Aviation Administration of China show.

That suggests that more than 60 of the 80 new airports envisioned in China’s economic master plan for 2011-2015 will end up in the red.

A third of all passengers and half of all cargo are channeled through just three aviation hubs of  Beijing, Shanghai and Guangzhou, according to CAAC figures.

Illustrating how fierce competition is, Shijiazhuang Zhengding International Airport, less than 300 kilometers from Beijing, will reimburse the cost of people’s travel to the airport from eight cities, including the capital, in order to attract passengers following a 4 billion yuan (US$645 million) expansion.

 




 

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